London’s benchmark FTSE 100 has recorded its worst New Year start this century, and its second worst since the index was first conceived. By market close on Monday, 4 January, the index stood at 6,093 points, having lost 149 points (2.4%) on the day.
Things started off badly with a sharp morning fall in response to the latest upsets in the East. The Chinese market was suspended for the day after the CSI 300 index dropped 7% and triggered the country’s new “circuit-breaker” mechanism, which is mean to reduce short-term volatility, after weak factory date spooked investors.
Growing tension in the Middle East after Saudi Arabia’s execution of a key Shia cleric, which threatens to deepen the divisions in the region, didn’t help, and the FTSE wobbled further throughout the day, putting in a final dive as the market approached closing time.
At the time I write, US markets are somewhat rattled too, with the S&P 500 down 2.1% and the NASDAQ down 2.9%.
Who’s hurting most?
Which individual companies are suffering? Insurers were among the hardest hit, with Old Mutual dropping 11.8p (6.6%) to 167p, Prudential down 77.5p (5.1%) to 1,453p, Standard Life losing 17.8p (4.6%) to 372p, and Aviva on a 19.2p (3.7%) fall to 497p, as finance stocks can be pretty precarious at the first sign of any worldwide turmoil.
Miners and commodities firms, unsurprisingly, were punished, with troubled Anglo American losing 21.8p (7.3%) to 278p, equally struggling Glencore not far behind with a 5.4p (6%) drop to 85p and Antofagasta on a 24p (5.2%) slide to 445p.
Asia-focused bank Standard Chartered took a 24p (4.3%) fall to 540p, but HSBC Holdings managed to stay out of the bottom 20 with a relatively modest 16p (3%) dip to 520p.
Dark portents?
Does this first trading day of 2016 foretell a terrible year for the FTSE? Of course it doesn’t — it’s just one trading day out of the hundreds to come. It always puzzles me why markets react so badly to short-term news — I mean, we know that when the index is marked down on a bad day it’ll surely be marked back up again before too long when the immediate panic recedes, so why not just hang on to shares instead of selling them and buying them back again and incurring costs?
That’s where private investors can win. I’ve seen days like this many times in my 30-year investing career and they’re surprisingly hard to see now when you look back at the long-term FTSE 100 chart — they all disappear into tiny ripples in an otherwise steady upwards climb.
And on top of that, most of the biggest companies are paying out regular cash as dividends, and canny long-term-buy-and-hold investors are enjoying higher and higher effective yields every year.
Bargains!
You know, I don’t see my favourite companies as being in any way different to the way I saw them yesterday — except that they’re cheaper and looking like even better bargains now!